Top tips for investing in property

But when it comes to choosing your property, here are some things to think about first.

1. Income vs growth capital potential

A property can earn you money in two ways: as an asset that increases in value over time, and through rental income. In deciding which property is right for you, you’ll need to consider your current situation and long-term goals.

Properties with the potential for high capital growth can generate stronger returns over the long term. However, they are often more expensive to buy. And as the rent is unlikely to cover the costs of mortgage repayments and maintenance, any increase in interest rates could see you struggle to hang on to the property.

On the other hand, properties with positive cash flow — where rental income exceeds your ownership costs — can offer a less risky way to invest. However, these are often lower value properties with less potential for capital growth in the long run.

2. Negative gearing

When the costs of owning a property are higher than your rental income, you can use this loss to reduce your taxable income. This is known as negative gearing.

While there are tax benefits to negative gearing, it’s a strategy that needs to be carefully considered. Your investment will effectively be generating a loss, so you’ll need to ensure that the potential capital gains are enough to make the investment worthwhile. For this reason, it’s important to choose your property carefully — and make sure it’s in an area with a strong record of growth.

3. Property management

Who do you want to manage your property? If you’re just looking to cut costs, it’s best to take care of the property yourself. But don’t forget that this means you’ll have to do everything on your own, from finding tenants and collecting rent to organising repairs and maintenance.

Hiring an agent to manage your property can save you a lot of hassle — and may not be as expensive as you think, as all management fees are tax deductible. A good property manager will make sure your rent rises with the market — helping you make the most of your asset.

4. Physical property or a property fund

As an alternative to purchasing, you might want to look into investing in a property fund. You can choose the fund that suits your investment goals — at lower cost than buying a property. You’ll have the ability to gain exposure to larger developments or commercial property, with the benefit of a dedicated fund manager. And the big advantage is, unlike a physical property, you can generally access some or all of your money when you need it.

5. Get professional help

With all the options available, it can be hard to know if you’re making the right decisions. That’s where professional advice can help. To create a property strategy that will help you meet your financial goals, speak to us on 1300 765 811 or info@mentor1.com.au